The Inflation Reduction Act’s introduction of transferability for clean energy tax credits was widely hailed by industry stakeholders as a way to democratize access to project finance. By allowing developers to sell a project’s credits directly to third parties, transferability expanded capital access for smaller projects that traditionally struggled to secure tax equity financing, while broadening the pool of investors.
In the two and a half years since the IRA provision took effect on January 1, 2023, it has already reshaped the clean energy financing landscape. According to market data from Crux, transferability has unlocked access to over $500 billion in private capital, with smaller and emerging energy technology projects comprising about half of the market in early 2025.
Transferability was largely preserved in the legislation that resulted from the GOP reconciliation scrabble earlier this month, and the market is generally expected to remain robust in the near future. But the new law’s sweeping changes to the clean energy tax credit landscape have also introduced new complexity, which could erode much of the accessibility that the transferability provision initially created — and make it harder for smaller entrants to compete in the evolving market.
Growing regulatory complexity
For a moment there, transferability’s fate was touch-and-go. The version of the “One Big Beautiful Bill” passed initially by the House rescinded it, catching the industry off-guard. So according to Brian Murphy, who leads the power, utilities, and renewables tax practice in the Americas at EY, the treatment of transferability in the final legislation is a major win for project finance.
“Transferability was arguably the number one issue for the [clean energy] sector,” Murphy told Latitude Media. “To the extent in future years there’s a decline in wind or solar credits, we expect we’re still going to see a really robust market with [other types of credits.]”
However, while transferability survived legislatively, there’s a test ahead in implementation. After signing the reconciliation bill into law, President Trump issued an executive order directing the Treasury Department to review key definitions — including what it means for a project to have “commenced construction” and how to define and enforce foreign entity of concern, or FEOC, restrictions.
That executive order injects some uncertainty into the transferability landscape, even with the reconciliation bill now signed into law, said Bob Moczulewski, a director with Baker Tilly’s tax practice. He expects Treasury will require tighter documentation and substantiation requirements for proving a project has started construction, like new forms or registrations. However, he doesn’t expect that the current threshold for beginning construction — spending 5% of total project costs — will increase.
The bigger question, Moczulewski said, is how the government will define involvement by an FEOC, and when it will release a comprehensive regulatory framework. Pulling it together is simply not possible in the 45 days mandated by Trump’s EO, he explained, so Treasury will likely release general guidance in that window instead.
“The concern will be, can they get those regulations issued on a reasonable basis during 2025, so that taxpayers can have some thought on how to utilize that for their projects,” he said.
For major developers with deep legal teams and substantial resources, these uncertainties are manageable hurdles. Those large players are “sophisticated enough to work around…a FEOC limitation,” Moczulewski said. Most of the Baker Tilly’s larger clients have a big enough backlog of projects and enough resources that they expect to have a solid stream of tax credit revenue all the way through 2029, when the wind and solar investment tax credits will end, he added.
Projects using the production tax credit, meanwhile, can continue selling credits out for another 10 years. But for smaller developers, the compliance burden and uncertainty will create a more significant hurdle.
Market stratification
Regulatory complexity is also likely to reshape buyer behavior in ways that favor larger players, said Laura Stern, head of clean energy tax credits at financial services firm Marex. To start, the unknowns around FEOC requirements may create a more risk-averse market in the near term.
For smaller developers, the compliance burden and uncertainty may force them to sell projects earlier in the development pipeline, she added, reversing a trend where some developers were holding onto their projects through operation. “The lower end of the market could get shut out,” Stern explained.
More generally, with the regulatory environment getting more complex, Stern predicts that insurance will play a larger role in transferability, in part as a way for buyers to mitigate challenges around FEOC rules.
Moczulewski explained that large credits (worth around $5 million or more) have always been easier to sell than smaller credits. The reward for those deals is always higher, thanks in part to the fixed cost of due diligence, legal review, and insurance. As insurance requirements get higher, , he explained, smaller developers are likely to face a disproportionately high burden to guarantee their credits.
FEOC requirements will come into play with projects that begin construction in 2026, and most of them won’t be online until at least the following year, given typical construction timelines. But the compliance preparations and market adjustments will be felt sooner, creating an advantage for developers with the resources to navigate the complexity.
A changing credit landscape
Tax experts agree that the transferability market will remain active well into the 2030s, but that its makeup will shift. Wind and solar still make up a significant portion of transactions, but emerging technologies were already becoming more prominent before the reconciliation process began.
Moczulewski and Murphy both point to the 45X advanced manufacturing credit as a source of immense growth in the market in coming years. That’s because those credits have wide applicability, and may face fewer FEOC complications due to their inherent focus on U.S, production. They also have a longer duration than many other credit types.
“There [are] going to be more eligible manufacturers in that area than the more limited fishbowl worth of solar and wind developers,” Moczulewski explained.
45X can apply to many different types of users, many of whom are startups. These relatively young companies generally don’t have a lot of tax liability yet, and are more likely to sell their credits than leverage them against their own tax bills. The transferability market is an attractive option for those companies in particular, because the cash flow can help them grow without raising as much additional money from investors, he added.
Greg Matlock, who leads the EY Americas tax practice focused on oil and gas as well as metals and mining, said the shifting preference for emerging credits will also be reflected in how buyers value certain credit types.
“Right now, there’s a higher discount on things like carbon capture, renewable natural gas, or other things, but it will be interesting to see how that mix changes over time,” Matlock said. That’s a dynamic that could start playing out in the second half of this year, as market activity picks up in the wake of more legislative certainty, he added.
In the longer-term, Stern is skeptical that the phase-out date currently set for wind and solar credits — 2029 — will actually materialize as scheduled. “I don’t see the cliff any differently than I saw any of the cliffs in the past,” she said. It’s not the case that, starting in 2030, wind and solar projects will stop being built and PPA prices will spike overnight, she added.
“What’s going to happen in that interim period is that there’ll be midterm elections, there’ll be another presidential election, and I’m not forecasting whether that cliff will ever actually hit,” she said. “It’s anyone’s guess whether that will actually materialize.”
